Monday, February 8, 2010

Using a mobile phone with a traditional service plan is not a cheap way to make phone calls, but they are so useful they've become the ubiquitous gadget. And while there's a lot of advertising that promotes the latest mobile phones, you'll have to look much harder to find out what the real cost of ownership will be to use it for a year. My research into this shows that prepaid mobile phone service can save you a lot of money.

A few years ago I had a standard cell phone family plan that I shared with my wife. It was pretty basic with 500 minutes, free calling between our phones, and the standard free weekends, all for only $50 per month (really $64 after taxes and extra fees). After our 2 year contracts expired I started shopping around and concluded that prepaid service was far more cost effective for us.

Here is the spreadsheet I use to compare the real cost of each of the plans. You can download a copy of the spreadsheet and adjust the numbers for yourself. To use the spreadsheet you need to add up all the minutes you used over a year (even if they were "free" minutes). We needed 2 phones so I only included family plans, and since we aren't heavy text message users I did not consider that in my calculations. If you need lots of text messages or a data plan then you probably won't find a suitable prepaid plan today (sorry iPhone fans). I'm hopeful that a data option will come to prepaid in the future but I'm not going to hold my breath.

Prepaid services can get confusing too, with variable per minute cost and minute expiration periods. The best ones I've found are Net10, which is always 10 cents with only the expiration time varying (up to 6 months based on how much you spend upfront), and T-Mobile which is 10 cents and last 1 year when you add $100 increments.

Check them out and run the numbers for yourself. If you have suggestions about how to improve the spreadsheet or tips for lower cost mobile phone services please share them in the comments.